Organizational Systems Design Model and Methodology

1. OSD Organizational Systems DesignModel and Methodology Presented by Starr Eckholdt The OSD Group Inc August 17, 2009

2. Understanding Company Requirements • Secure the best expertise in Organizational Systems Design to enable rapid implementation of the new 5 Point Business Strategy. • Carefully define Company’s “Competitive Advantage work,” and align all work processes with the new Business Strategy and shareowner requirements including customers and employees. • Conduct a comprehensive work process assessment that will assure identification of Competitive Advantage work, Strategic Support work, Business Essential/Foundation work, and elimination of non-value added work. Build focus and alignment with Core Business Processes. (Note: We understand that there may some ambiguity regarding what the “real” Core Processes are or should be. It is critical that these are clarified accurately and then the entire business capabilities and structure be aligned to optimize these processes. • Deep expertise in Strategic Organization Design will be required along with facilitation of Design Team(s) to ensure consistency of operations and the highest customer service. • Build the foundation to design a Talent Management process that will attract the finest talent and ensure retention of critical knowledge assets for the future. August 17, 2009

3. OSD Foundational Concepts Competitive Advantage – Only comes by doing similar activities differently, or different activities. Organizations are perfectly designed to get the results they get. We help organizations make the design choices that will get required results. Organizations are made up of Processes; (e.g. demand creation, supply chain, strategic planning, etc.). But, not all work is created equal. We differentiate between competitive advantage work, strategic support, and business essential work to leverage resources where needed. Knowledge is the purest source of competitive advantage. We help you understand how to compete with the knowledge base you have and to leverage that across organizational boundaries. Strategy and organization design are not enough – unless Hearts and Minds are engaged, nothing gets done right. We make this happen. August 17, 2009

4. Strategic Design Purpose, Vision, Mission Guiding Principles Goals Capabilities Work Structure Renewal Alignment Incentives Information People Organizational Systems LEADERS AND LEADERSHIP The Organizational Systems Design Model Design Choices Results External Environment Culture August 17, 2009

5. Methodology and Approach Focus Align Implement • In depth assessment of the current state: Work system, Structure; information system; People systems; Reward and renewal systems • Establish performance targets • Create design principles • Identify breakthrough design concepts • Design the future state organization • Design the transition organization • Develop resource utilization and selection process • Leadership development strategy and education • Financial impact analysis and options • Launch project to identify clear deliverables, time table, and overall desired results • Conduct Snapshot Assessment • Identify the Design Infrastructure (Steering group, Design Team(s), SME’s, technical resources, etc.) • Create Master Design and Integration Plan • Benchmarking activities and best practices • Mobilize the Leadership • Envision the Future State • Create the Strategic Architecture and integration strategy • Communication Plan • Create implementation strategy and detailed plans • Develop organizational systems: new work processes equipment and facility requirements; role and responsibilities; information system; people system design recommendations; reward system to align with company • Identify the implementation team and conduct and facilitate implementation of new design • Charter new team(s); trial and modify design as needed • Full implementation roll-out • Implement evaluation plan • Charter renewal team August 17, 2009

6. Critical Success Factors for a Successful Redesign Effort • Significant commitment and involvement of senior leadership. • A clear picture of the future state organization that is shared by leadership team members… “Unity of Identity.” • Significant investment of resources in Assessment, Design and Implementation activities… Speed is contingent upon available resources. • Business Strategy is aligned with essential capabilities. • Identification, engagement, and involvement of key stakeholders. • Availability of the best talent in the organization as members of the Steering Committee, Design Team, and appropriate sub-teams. • Willingness to change previous assumptions about “how we have done things in the past.” • Focus on the “critical few” measures that drive design results. August 17, 2009

7. Critical Success Factors, continued • There is a sufficient case for change. • It is always an advantage for the organization to acquire the internal capability to become “self-designing”. Tools, education, and hands-on experience by members of the organization during the design process reduces the dependence on external consulting resources. • Know when to go fast, but more important when to go slow to go fast. August 17, 2009

8. Resources • OSD consultants are experienced practitioners who have many years of experience consulting in a broad range of industries and have also served as leaders inside organizations • Following are the bios of likely consultants who could be selected to work on this project August 17, 2009

9. Starr Eckholdt Areas of Expertise Starr is Founding Partner of The Organizational Systems Design (OSD) Consulting Group. As a pioneer in the field of Organizational Systems Design he co-created the original OSD Model and Methodology in 1984. He has been an architect in the design of High-Performance Work Systems Design for over 25 years. His work in aligning Business Strategy, Strategic Human Resources, Leadership Brand and Change Management has enabled a practical approach for comprehensive large-scale design, redesign and change in an upside down world of business change. Recent client work has included: Leading the start-up of an innovative team-based design for a new $1B metals production facility in Iceland; Leading the re-design and implementation of a top US Defense contractor; Leading a team-based organization re-design for a top Financial services company; Leader of a newly designed global Human Resources Education program for 300 members of a top European pharmaceutical company. Other consulting clients have included Alcoa, American Express Financial Services, AT&T, Corning, Bell Helicopter Textron, Citi-Group, EDS, Ely Lilly, Exxon, IBM, Lucent, Kellogg’s, Merck, Nationwide, Novartis, PacifiCare Health Systems, Tennessee Eastman, UNUM Insurance Co., U.S. Air Force, and others. Starr conducts education events and is a speaker at national and international conferences. His engaging style in working with executives, management teams, operational business units, and design teams stimulates collaboration and excellence. His current work includes Strategic Organization Design, Designing Organizations for High Performance, Large-scale change through fast cycle implementation; Strategic Human Resources Implementation; Executive team leadership and executive coaching, Background Prior to forming The OSD Consulting Group, Starr was a Partner at The RBL Group; President of Corporate Systems Design; VP of The OSD Division of Franklin Quest; Founding Partner of The original OSD Alliance; and an Internal OD Manager at Exxon Enterprises. He holds a Master of Organizational Behavior (MOB) from Brigham Young University, a faculty member with Duke Corporate Education and continues as a Consulting Partner with The RBL Group. Publications “Intangibles by Design” Leadership Excellence, March 2005, with Norm Smallwood The Corporate Systems Design Handbook: Creating High-Performance, Self Designing Organizations, with Ron Axtell “Transform or Die: The Core Competence of Corporate Reinvention and Redesign” 1998 with Ron Axtell “Redesigning HR Organizations for High Performance”, May 1996, with Steve Jacobs The OSD Introductory Workbook and The OSD Advanced Course Handbook, 1993, with Ron Axtell. “Re-engineering HR” with Steve Jacobs; unpublished manuscript, 1992. Service Delivery

10. Mark Rhodes

11. PaulGustavson Paul is an OSD Principal and Consulting Partner. He specializes in leading organizational design architect strategy making, the design of high performance work systems, change management and knowledge management. In the early 70's, he began an in-depth study of high performance teams and the systemic design of high commitment work systems. Since 1992, Paul has served as a Marriott School of Management's MOB Advisory Board member and as its Chair for 8 years. In April, 1999, he received the Marriott School of Management's William G. Dyer Distinguished Alumni Award for his contribution in the field of change management, strategy, organization design, and knowledge management. In 1999, he was selected as a member of Work in America's National Advisory Council focusing on identifying best practices in creating and sustaining high-performance teams and work cultures. Paul's consulting experience has included work in the area of strategy, organization design, knowledge management, team development and change management at a number of companies, including American Express, Advanta, American Transtech, Amoco, AT&T Capital Corp., Amerada Hess, BP, BHP of Australia, Bristol Myers Squibb, Cherokee Nation, Colgate Palmolive, Deere Financial Services, Exxon, GE. InTek, Pennzoil, Pitney Bowes, National Semiconductor, Veterans Administration and Zilog. Paul has worked nationally and internationally in a number of industries, including automotive, steel, oil, chemicals, electronics, financial services, leasing, aerospace, transportation and government. Paul specializes in helping clients to align strategically with key factors in their environment and aligning the design choices an organization makes with culture necessary to achieve the desired outcomes of that organization. Over the years, Paul has been privileged to work with clients who have been recognized nationally for innovative organizational design. The Veteran's Administration, for example, was the first winner of the Al Gore Hammer Award for reinventing government and a recent recipient of the prestigious PILLAR award. Colgate's Hill's Pet Nutrition facility in Richmond, Indiana has won many national awards as a start-up plant for innovative work design. Several of Paul's clients, including I/N Tek, American Transtech, the Geon Company, AT&T Credit Corp., and Veterans Administration have been featured on Work in America's national tour of outstanding organizations. The work at Amerada Hess received the 2000 Computerworld Smithsonian Award "A Search for New Heroes". Paul holds a Master of Organizational Behavior from Brigham Young University Marriott School of Management.

12. BarbaraMcCaffrey Background Barbara has over 20 years of experience consulting in Fortune 500 companies focused on achieving targeted, sustainable performance improvement through the alignment of strategy and organizational capabilities. She has led large system redesign and change efforts both internally and externally. Prior to launching a consulting career, she managed the Training and Organizational Effectiveness function for Fortune 500 companies. As an internal Organization Development professional, Barbara supported key executives and their teams to achieve targeted business results through organization assessment, leadership development, executive coaching, team development, and ongoing organizational consulting. Barbara holds an M.A. in psychology from Pepperdine University. Areas of Expertise Barbara is a Consulting Partner with The OSD Group, helping clients achieve targeted, sustainable performance improvement through the alignment of strategy and organizational capability. She has specialties in strategy development, organization design, and leadership development. She also has significant experience in corporate training, organization assessment, team development, executive coaching, succession planning, and performance management. Barbara has over 20 years of experience in internal and external consulting with Fortune 500 companies in industries such as health care, aerospace, high tech, communication, manufacturing, and distribution, including companies such as TRW, Bell Helicopter, Bergen Brunswig, PacifiCare Health Systems, Harte-Hanks Communications, and Western Digital. She has also consulted to various Boards such as American Cancer Society, Orange County Bar Association, ASTD, and California Medical Association. She is a well-known speaker and has spoken at regional and national professional conferences such as ODN, ASTD, and SHRM on topics such as architecting and managing large scale change, organization design, performance management, and accelerating change.

13. JonTveten

14. MikePanowyk

16. Additional slides Building Organizational Capability August 17, 2009

17. Attributes of High-Performance Organizations • Strategy addresses the major stakeholders’ most important needs. • Clearly-defined values and guiding principles drive organizational choices and behaviors. • All organizational systems are aligned to deliver high quality results. • Individuals make daily decisions and solve problems at their source. • Skills and knowledge expand in alignment with strategic capabilities. • Relationships with key stakeholders are true partnerships that deliver competitive advantage. • The organization renews itself and redeploys its resources as the environment requires. August 17, 2009

18. 1 0.9 0.8 Regression of earnings and stock price 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1976 1982 1987 1992 2000 2006 Case for Intangibles • Financial results account for a shrinking proportion of a • company’s market value Who is managing the intangibles? Confidence in the future Confidence in track record • “Intangibles” now account for about half of market value August 17, 2009

19. How Leaders Build Value: Architecture for Intangibles Build Organizational Capabilities Corporate & Business Strategy for Growth Align Technical Core Comp Investors Customers Employees Regulators Community Talent Leadership Speed of Change Strategic Unity Customer Focus Accountability Unity of Identity Innovation Collaboration Learning Compelling Strategy Technology / Product devmt Customer acquisition Operational excellence Keep Promises August 17, 2009

20. Organizational Capability Issues August 17, 2009

21. Focus Eliminating non-value-added activities Simplifying and streamlining activities Standardizing activities and reengineering processes Consolidating and realigning business unit process and activity responsibilities Reconstructing the business model and the parameters of operating performance ChangeContinuum – SimplytheBest Challenge Change Dimensions “Don’t do things” Rationalization Continuous Improvement Improvement “Do things better” Financial Re-engineering (FRE) Enterprise Asset Management (EAM) Sarbanes-Oxley (SOX) Redesign “Change how we do things” Redesign “Change who does things and where they get done” Restructuring “Redefine what things we do, why we do them and how they will get done” HR “Deep Dive” Supply Chain “Deep Dive” Utility of the Future Reinvention (“Game-Changers”) Low High Degree of Transformation